To start off with, there is no current litigation which seriously jeopardizes the status of the Ground IC/ISP model.
However...
That DOESN'T mean that the model is absolutely compliant with all law concerning Independent Contractors.
http://www.irs.gov/pub/irs-pdf/p15a.pdf
Go to page 7 of the above document.
Providing a short summary of the IRS interpretation of Common Law regarding Independent Contractors
There are three broad categories which determine degree of control and independence of the potential IC: Behavioral Control, Financial Control and Type of Relationship between the parties (employer and potential IC or employee).
Behavioral Control relates to how the 'employer' has the right to direct the work of the 'contracted' party (or employee). In general the following criteria are followed (the greater the control exerted by the 'employer', the greater the probability of declaring the contracted party to be an employee rather than an independent contractor):
1. When and where to do the work
2. What tools and equipment to use
3. What workers to hire or to assist to do the work
4. What work must be performed by a specific individual
5. What order or sequence to follow.
So applying the test to Ground 'contractors'... The IC's are told when and where to do the work, the IC's are told what equipment to use, the employer (Ground) have oversight on who the IC's can hire and assist in the carrying out of the work, there is no requirement that
specific individuals do work, and finally the order and sequence of performing the work
is determined by FedEx Ground.
So clearly under the Behavioral Control 'tests', the Ground 'contractors' are much closer to that of being in an 'employer-employee' relationship, rather than an employer-independent contractor relationship.
As the IRS document states: "The key consideration is whether the business (FedEx Ground in this case) has retained the right to control the details of a
worker's performance (that would be the IC's/ISP's) or instead has given up that right".
Any fool can determine that in the case of Ground PUD contractors, that the right of control over the details of worker performance is SOLELY within the right of control of FedEx Ground - so behavioral control is that of an employer-employee relationship.
Financial Control...
Here things are a bit muddled. The key item against the use of the IC model in Ground is the "extent to which the worker (the potential IC) makes their services available to the relevant market". Here, the Ground 'contractors' are clearly not players - they don't make their services available to the 'relevant market'. In essence, they are NOT cartage agents, but tailored specifically to suit the needs of FedEx Ground, even down to the level of the individuals performing the work wearing FedEx uniforms.
Finally is the Type of Relationship between the parties.
1. There are written contracts (favoring IC status)
2. FedEx Ground DOESN'T provide any sort of 'employee type benefits' (favoring IC status)
3. The 'permanency' of the relationship clearly favors employer-employee status. There aren't a 'pool' of contractors bidding on each route every year, the contractors 'own' the route as long as they meet the requirements of FedEx Ground. (favors employer-employee status)
4. Finally, the extent to which the services performed by the worker (potential IC) is a 'regular aspect' of the company (FedEx Ground in this case). Here again, the employer-employee model is clearly supported. It isn't like FedEx Ground is contracting with a firm that specializes in installation of electrical equipment (electricians), the "contractors" are an INTEGRAL part of carrying out the normal, everyday business of the employer (in this case, FedEx Ground).
Therefore, from a Common Law perspective (and even the perspective of the IRS's own criteria), the use of the IC model within Ground is contrary to the intent of the law.
Now... this doesn't mean that some court is going to come right out and declare it in violation of the law and order a halt to the arrangement. FedEx is clearly using its legal resources to stay a whisker's thickness inside whatever criteria a court may apply in any given litigation. The problem is that there hasn't been a clear enough case brought to court which would establish a PREPONDERANCE of proof that FedEx is inappropriately using the IC provisions of Common Law.
I 'state', that knowing the 'intent' of FedEx in the matter, that the use of the IC model is clearly in violation of the IC provisions - but in court, the benefit of doubt always goes to the defendant (in this case FedEx Ground). Therefore, any potential litigation MUST be able to present a PREPONDERANCE of evidence that FedEx is in violation of the law.
But again, establishing preponderance is what attorneys do in court, and FedEx has retained some very good attorneys to argue their position.
So it appears that the 'weak spot' of FedEx is the IRS. If someone in the federal government would have the audacity to get the IRS to determine for tax purposes, that the IC's of Ground are really employees of Ground - the whole arrangement could come crashing down.
This all just goes to illustrate that our legal system results in getting the best justice that a party can afford. In this case, FedEx Ground is able to afford quite a lot to ensure their version of justice prevails.
